Trading securities online can seem like a great way to earn income from the comfort of your home, but the dynamics of making a profitable investment can seem like a daunting task.
Perhaps the reason may be the fact that for a long time, the trading of financial securities was left to professional brokers, but that is no longer the case.
Even though, the trading of financial securities requires you to have a robust skill-set of techniques that can enable you to make careful and calculated decisions; you can hone and develop these skills through learning how trading works, how the securities exchange works and mastering the skills required of you to become an effective trader.
How Does Online Trading Work?
Online trading is the act of buying and selling financial securities through an online trading platform. These platforms should be licensed and registered with the NSE as internet-based brokers.
Online trading has become popular over the years due to the many opportunities made available over the internet. Online trading has enabled everyone who has access to a computer, some money, and a good financial history the ability to invest in the securities market.
Prior to online trading, people relied on the services of a professional broker, who would buy and sell orders on your behalf but charge you a commission.
The beauty about trading today, is that you are able to buy and sell the securities yourself in the fraction of a second using any internet-enabled device.
However, online trading comes with substantial financial risks. So just because the securities market is easily accessible, one should not underestimate the gravity of online trading.
Where Do I Start?
Before you can trade online, you will need to select an online brokerage firm. A brokerage firm is a financial institution that facilitates the trades on your behalf and stores the money and stocks in an account. Make sure that the brokerage firm you choose is a reputable institution.
As you make a decision on the right brokerage firm to engage with, make sure you also:
Set out how much money you intend to invest: You need to plan your money and determine exactly what type of investment you are willing to make.
As a beginner, you should start slow and make carefully calculated investment decisions. Make sure you start investing with what you can afford to loose. Do not invest everything at a go in the beginning.
Once you have realized the gains from one or two securities, you can begin to reinvest those gains which have now become your principal into other stocks and funds.
Furthermore, some firms require you to have a certain amount of money to open an online trading account, while others have a minimum operating account balance. Make sure you look out for any extra charges the account may have as you use and transact with it.
How frequently you intend to trade online: Depending on the type of investments you want to make, ensure you clarify all the charges that shall be associated with your account so that you do not get extra charges for account inactivity. Also, find out how much using their site and their research will cost you as you make your investments.
What you want to trade: Some firms only allow you to trade stocks while others can allow you to trade different types of securities. Depending on what you want to do, make sure you do your research and choose a firm that allows you to trade what you want.
Your experience: As a beginner, some online brokers do offer you some assistance as you familiarize yourself with the trades, but this may also come at a cost.
A comprehensive list of online brokerage firms can be seen here.
Once you have done your research on the online brokerage firm and you have made a decision that you shall use it, you will need to register your personal and financial information.
Just like any website that requires your personal and financial information, you should make sure your online broker has good security measures, including automatic logouts and transmission encryption.
In addition to providing this information, you will need to create either an individual or a joint account. Once you have opened and funded your account, you can now buy and sell securities.
Should I Just Invest?
So is it really that simple? Not entirely. As a beginner, make sure you develop the habit of doing your research before you make an investment decision.
Start by intensely familiarizing yourself with the securities market and especially seeking to understand how the demand and supply system works.
Trading online also comes with some financial risk that can be substantively reduced if one knows how to choose and invest in the right securities.
You need to know information such as the company’s financial reports, public statements, income statements, quarterly, yearly earnings, and so on.
Analyzing a company’s historical and current performance can help you make an informed decision on determining whether the value of the security shall increase and thus make you a worthwhile investment.
Other than your personal research, make sure to verify that information with your brokerage firm. Some offer reports and analysis for you.
The most important skill you will need to develop as a beginner is practice. Practice by reading the latest news and financial reports of various securities relentlessly.
Before investing your money, take the time to learn the dynamics of trading online. Alternatively, you can also enroll for a course so that you learn more about it.
Even though buying and selling securities online can make you a fortune, it is just as easy to lose that money. To become a successful online trader, you should be ready to make and lose money.
More than anything, always do your research and stay informed. All the best!
Have you ever thought of trading online? How have you made it work for you? Please let us know your thoughts in the comments section below.